Correlation Between KARRAT and MTL

Can any of the company-specific risk be diversified away by investing in both KARRAT and MTL at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining KARRAT and MTL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KARRAT and MTL, you can compare the effects of market volatilities on KARRAT and MTL and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in KARRAT with a short position of MTL. Check out your portfolio center. Please also check ongoing floating volatility patterns of KARRAT and MTL.

Diversification Opportunities for KARRAT and MTL

0.86

Correlation Coefficient

KARRAT  MTL

Very poor diversification

The 3 months correlation between KARRAT and MTL is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding KARRAT and MTL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTL and KARRAT is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on KARRAT are associated (or correlated) with MTL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTL has no effect on the direction of KARRAT i.e., KARRAT and MTL go up and down completely randomly.

Pair Corralation between KARRAT and MTL

Assuming the 90 days trading horizon KARRAT is expected to under-perform the MTL. In addition to that, KARRAT is 1.58 times more volatile than MTL. It trades about -0.15 of its total potential returns per unit of risk. MTL is currently generating about -0.09 per unit of volatility. If you would invest  148.00  in MTL on November 27, 2024 and sell it today you would lose (60.00) from holding MTL or give up 40.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

KARRAT  vs.  MTL

KARRAT

Risk-Adjusted Performance

Very Weak

Over the last 90 days KARRAT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Crypto's basic indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for KARRAT investors.

MTL

Risk-Adjusted Performance

Very Weak

Over the last 90 days MTL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's essential indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for MTL shareholders.

Pair Trading with KARRAT and MTL

The main advantage of trading using opposite KARRAT and MTL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KARRAT position performs unexpectedly, MTL can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in MTL will offset losses from the drop in MTL's long position.

The idea behind KARRAT and MTL pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.